China textile average profit margin at 3.9% in 2007

China's textile companies posted an average profit margin of 3.9% in 2007, and two thirds of the companies surveyed reported an average profit margin of 0.62%, according to a survey conducted by the China National Textile and Apparel Council (CNTAC) in early March.

The survey covered six provinces, including Jiangsu, Zhejiang and Guangdong, which occupied 85% of China's textile exports.

China's export-oriented textile industry is suffering from the low profit margins. Fujian Manfang Co., a state-controlled textile company in southern Fujian Province, lost RMB 9.53 million (about US$1.36 million) in net profit, according to its 2007 annual report. Some of the small and medium-sized companies are even on the brink of shut down, according to Sun Huaibin, a CNTAC spokesman.

Experts said the low profit margins were mainly due to the appreciation of RMB and the increasing cost in both raw materials and labors. 1% rise in the RMB would cause a 2% to 6% decline in textile commodity profit, according to an estimate by webtextile.com.

Besides, the declining demand from the U.S. and Europe and the severe winter weather also affect the industry. The country's textile and garment exports in February declined 32.9% from the previous month, according to the Customer Statistics.